The average UK car insurance price fell to its lowest level since 2015, new figures revealed.
The average price for comprehensive motor insurance in the first quarter of 2022 was £416, according to the data from the Association of British Insurers (ABI) — a 5% drop compared to the same time period a year before.
A change in insurance pricing at the start of the year ended a “loyalty premium” paid by customers meaning prices for new policies have increased but the cost of renewals has fallen.
The new rules mean motor and home insurers cannot give renewing customers a higher price than they would pay as a new customer.
The measures were brought in by the Financial Conduct Authority (FCA) which said the rules were meant to bring an end to unsustainably low-priced deals for new customers.
Motorists are expected to save £4.2bn collectively over 10 years due to the changes, according to the FCA.
The ABI found a widening gap in the difference between new and renewed average premiums since the new rules were introduced. The average premium paid for a new policy in the first quarter was £105 higher than for renewals.
The average price of new policies was £480, up by £34 compared to a year before, while the average for renewed policies was £375, down by £55.
Insurers continue to face cost pressures on premiums, due in part to the continued global shortage of semiconductors, the ABI said. The shortage has been exacerbated by the coronavirus pandemic and the war in Ukraine.
The average car can contain up to 3,000 semiconductor chips, and the shortage affects vehicle repair times, the ABI added.
The price of paint has also been on the rise and vehicles are becoming increasingly sophisticated and more costly to repair, it said, while a lack of skilled labour in the vehicle repair sector is also having an impact.
“Like other sectors, motor insurers face rising costs," said James Dalton, the ABI’s director of general insurance policy.
“While it is going to be extremely challenging for these to be absorbed, insurers are doing all they can to keep prices as competitive as possible as millions of household cope with the cost-of-living crisis.
“As the FCA has said, the impact of their reforms to pricing rules introduced on 1 January this year could lead to some consumers paying higher prices if they used to benefit from significant new business discounts.
“For some it could still pay to shop around for the policy that best meets their needs.”